Originally Posted by
Gunfighter
I'll propose a better trade would be selling put premium only. The IV is >100% and the max downside loss is capped at 100%- premium collected. It's a statistical winner. Max upside loss could exceed 100%, if the stock triples.
* Please don't take me seriously, I'm playing with a paper account. My trading opinions are equivalent to flying advice from a teenager playing MS Flight Simulator.
You would get better results using this as your decision matrix.
Always good for a discussion. I would look at doing this on a stand alone basis as a strangle(you are correct about the theoretical unlimited loss on the upside) Pretty low volume. A mitigating factor is, I bought RMO towards the close on Thursday after a PITA selling of RMO in Fidelity after the name change on Wed from RMG to RMO at 31. Had to call a broker at Fidelity because they didn’t handle the conversion as seamlessly as I would have wished. Nonetheless, it would be effectively a covered call with the naked put as you suggested. I opened a TT account and instead of paper trading( a good recc ) I have made some differing trades (IC, butterfly, strangle, vertical) to learn(no pain, no gain). Spent 1 day waiting on a fill, had to adjust the bid the next day to get filled. I suspect on a low volume stock like RMO that might also be a factor.
I have used the “duplicate me” of several TT traders but was wondering about my own pick. Seems the metrics are as good or better than a strangle from the pro’s at TT. I was tilting towards the strangle due to my long RMO stock but would have considered it on its own merits as well as what you are thinking. Since I am a Boomer and am well acquainted with all the “missionary positions” of options, I was interested in some of the “bark like a dog” or “pretzel positions”.
Signed,
An old dog trying to learn new tricks